The Dimming Lights of Apollo Global

The financials are ugly as Caesars has had five straight quarters of losses and may now need to restructure its debt. Moody's gives the company a credit rating level reserved for customers in "poor standing." Remember if this company goes under, those bond holders come first and those unlucky IPO buyers? Well, buying this stock was a roll of the dice.

Berry Plastics (BERY) is another Apollo deal that fell flat. It too was bought by Apollo in 2006 and then sold to the public last week. Debt? $3.8 billion. It was priced at $16, but opened at $15.25 and can now be bought for $15.00. Apollo still owns 59% of Berry, but with the way they've burned the public on these deals investors have less appetite to help Apollo out.

Even Apollo's own IPO hasn't gone well. The company went public in 2011, priced its shares at $19 and hasn't seen that level since.

Renaissance Capital noted in its second quarter 2012 review that private equity-backed IPOs deal size was down 51% and proceeds fell 56%. At the time of the review Renaissance noted that Ignite Restaurant Group (IRG) was the shining story of the group. That company has since gotten in trouble for its accounting and dropped from $19 to $13 a share.

To be fair, they haven't all been losers. Apollo brought out GNC (GNC) and that stock has performed fairly well. But even GNC went to the IPO table only to be pulled at the last minute and similar to the others, it is loaded with debt. GNC carries a little over $1 billion in debt, but luckily the company was helped with increasing revenues.

Still GNC is fighting many lawsuits related to the Hydroxycut supplements and is subject to product recalls -- the most recent being a peanut butter product. The stock, though is up 36% for year-to-date.

The lesson? When an investor sees Apollo is associated with an IPO, he or she should look closely at the debt levels and logically think about what it will take for the company to be able to pay off that sum. If the answer is one perfect quarter after another, they may want to steer clear of helping Apollo out with said debt.

After all, many of the buyout firm's deals have come to market with plenty of flash and buzz. But it hasn't taken long for a lot of these bright lights to dim when the reality of their debt-laden balance sheets begins to set in.

--Written by Debra Borchardt in New York.



>To contact the writer of this article, click here: Debra Borchardt. Follow @WallandBroad

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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